General Motors Corporation (GM)

Has been cheap for 20 years, and can't get out of its own way. PE around 5-6x. Never any growth rate. Can trade it. If you want something exciting on PEG, buy TSLA when it's on its back.

Wells Fargo projects that a strike would cost GM $2.7 billion and Ford $2.4 billion of adjusted EBIT a month. That said, he's not that worried and is not a risk to sell the carmakers. A strike is a one-off event, and the stock market cares only about the future. Also, Biden won't let a strike drag on; cars are a critical industry. Third, these stocks have already come down to absorb a stock. That said, if the strike leads to much higher wages, that would hurt these stocks. Don't rush in to buy these stocks.

There is a transition to EV's going on and GM is starting to get into this. However it is hard to be nimble when it is such a large company. The internal combustion engine market will continue with most cars still belonging to this category. He is not buying at these levels but is watching.

Downside of EV trend is that for traditional car makers, all the cash derived from selling traditional vehicles has to go right back into the EV side. Avoid the sector like the plague. Instead, look for component parts like chips and sensors.

He is not optimistic about the space. There is a slowdown in the auto sector and you have to weigh the used car markets coming down and increasing costs.

Legacy car companies still have valuable assets. 
Does not own shares.
Rebound in travel will help business.
Unsure on future of business.
EV deal with Tesla positive. 

EV sales are up 365% YOY, but mostly from the Chevy Bolts. Battery supply chain issues hamper sales of other EVs. Great PE.

Recent deal with Tesla a wise move for long term partnership in electric vehicle industry.
Good long term prospects for the business.
Very high demand for products.

At the time, he considered GM defensive and didn't expect a downturn in autos because inventories were so low at the time. GM has done well this year, beating expecations and trading at 6.5x forward PE. It's dragging its heels and expects growth in the future, namely in EV's. He's sticking with it.

Given ongoing supply chain problems, car inventories on dealer lots in this sector are half the historic average, which gives pricing power to the carmakers. They just beat guidance for the 19th time in 20 quarters. Also, they raised guidance--the consumer is still paying higher prices. Trading at 5x earnings and below book value. Growth is still here.

Auto makers taking hit on shares due to recession fears.
Tesla cutting price on cars wrighing on all companies ability to generate prodits.
If investors take long term view, excellent time to buy. 
5x earnings trading price good opportunity.
Recovery from pandemic will increase sales.
Electric vehicles also presenting opportunity. 

Owns neither. Cheap for a reason, until they're no longer in combustion engines and just compete in EVs with TSLA, which will be hard. 

Big OEM companies are in a very difficult situation. Legacy businesses trying to move to EV. But the combustion business is supporting the EV business. Being tied into dealerships make things difficult too. With TSLA, you order online and then go pick it up, like buying an iPhone.

Combustion side involves so many more parts than EV, so layoffs on the table. More things can go wrong with combustion engines than EV. 

It trades at a low PE, but carries high risk. We're headed for a cyclical downturn in car sales. Car loan rates have jumped from 5.6% to 9% in the past year. Also, few analysts are confident that it can transition easily from gas cars to electric or how to balance the two types. Pure-play Tesla has an edge. Also, the company is heavily unionized. Last year, it suffered supply chain shortages. GM is investing heavily in self-driving cars and ride-hailing, but the street doesn't believe in it, because the future valuation has not budged. Further, GM's market share in China has fallen from 15% to 10%; maybe China's reopening will help. But if the Fed manages a soft landing, this stock will take off.

Let the management do its work, aiming to double revenues by 2030. These are long-term assets. The naysayers are just making a lot of noise. Higher margins than Ford.